Low Sugar - the New Low Fat

May 02, 2006
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by FoodBusinessNews.net Staff

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The popular sport of bashing the villains responsible for the worldwide obesity epidemic has made the food industry rather creative in offering better-for-you versions of consumers’ favorite indulgences. Bakery products are on the A-list — global biscuit sales reached US$52.5 billion in 2005. But an ever-growing number of consumers want to eat their cake without a guilty conscience, and they are also increasingly concerned about the amount of sugar in their children’s diets, particularly when it comes to breakfast cereals.

Global market analyst Euromonitor International, London, England, reported that worldwide retail sales of reduced-sugar bakery products grew by almost 12% in 2005, more than double the growth recorded by low-fat baked foods.

AMERICA TAKES THE CAKE. According to Euromonitor International, the health and wellness bakery products market was worth US$36.3 billion in 2005, which constitutes 11.7% of the total global bakery products market. The company forecast a rise to US$44.4 billion by 2010, to make up 13.2% of total bakery products.

In recent years, growing consumer demand for products with lower sugar content, combined with technological advances in the development of sweeteners and their successful integration into bakery products, have given rise to three sub-categories: reduced-sugar, reducedcarb and diabetic bakery products. The actual difference between products in these subcategories (with the exception of bread) largely lies in their positioning and in how they are marketed, rather than in product composition. Global retail value sales of the three combined subcategories amounted to US$2.9 billion in 2005 (or US$1.5 billion if excluding lowcarb bread sales).

The leading market by far for these products is the US, where in 2005, reduced-carb, reduced-sugar and diabetic baked foods combined grossed retail value sales of US$2.2 billion (reduced carb making up 72% of this because of the large market size for low-carb bread). Excluding bread, the US market for "reduced" products such as biscuits, cakes and breakfast cereals reached retail value sales of US$989 million. Western Europe, the runner-up market, lagged behind with US$342 million in combined value sales (excluding reduced-carb bread). Other world regions’ sales were miniscule by comparison. See "2005 Reduced-Sugar, -Carb and Diabetic Bakery Product Sales by Region" above.

REDUCED SUGAR AHEAD. Because the US leads the trend, it is worthwhile taking a closer look at this market. Currently, there is a profound shift away from reduced-carb baked foods towards reduced-sugar and diabetic bakery products. The fizzling out of the Atkins Diet in late 2004 resulted in the mass withdrawal of low-carb bakery products from US supermarket shelves. In 2005, reduced-carb cake and breakfast cereal value sales fell by 13% and biscuits by a whopping 30%.

Reduced-sugar bakery products are more likely to be targeted at children than adults, and in some cases, reduced carb items are being repositioned as reduced sugar. Kraft introduced a line of sugar-free Oreos in January 2006, which are virtually identical to the company’s previous low-carb product — a timely move, considering the vociferous criticism vented at food manufacturers for their role in surging childhood obesity rates.

Vehement attacks on sugary breakfast cereals have triggered a spate of reformulations. In the US, reduced-sugar breakfast cereal value sales grew by an impressive 24% to US$189 million in 2005, nearly doubling in value sales since 2003. Kellogg launched its sugar-reduced versions of Frosted Flakes and Froot Loops, which cut their sugar load by one-third, in 2004. General Mills, with the help of Splenda sucralose, went further than that and reduced the sugar content of its Trix, Cinnamon Toast Crunch and Cocoa Puffs by 75%. This trend, albeit from much lower bases, was mirrored in Australasia, Western Europe and Latin America.

Diabetic bakery products are still fairly niche but have great potential. In the US, value sales amounted to US$169 million, but with a high growth rate of nearly 30% in 2005. Murray’s sugar-free biscuits, targeted primarily at the diabetics market, are highly successful in the US. Despite being a niche product, diabetic bakery as a category is well established in many countries. In Germany, for example, Bahlsen’s Comtess Diät brand of cakes for diabetics and the Schneekoppe brand have loyal customer bases.

There is a notable absence of diabetic bakery products, reduced-sugar cakes and biscuits in Australia. Australians have not grown up with sweeteners in their diets and seem to have fostered a dislike toward them. Eastern Europe, where sugar is generally still viewed as a nutritious component of the diet, especially where children’s diets are concerned, has not yet caught on either. SWEET OUTLOOK. The future of lowsugar bakery products is bright. Although reduced-carb products are slowly being phased out in the US, the empty shelf space is being refilled with sugar-reduced products and, adhering to the latest trend, low glycemic index (GI) products catering to the adult market. These products rely partly on high amounts of slowly digested carbohydrates and also sweeteners that do not affect blood sugar levels.

The GI diet has found much favor among health professionals and is popular in Australia, which may help products gain a foothold in this challenging market, as well as markets outside the US, where low-carb failed. Indeed, the anticipated spread of low-GI products may even help reduced-sugar baked foods usurp their reduced-fat cousins because a higher fat content also lowers GI. Euromonitor International forecast nearly double the compound annual growth rate for reduced-sugar compared with low-fat bakery global sales, 6.3% and 3.9% respectively, for 2005 through 2010.

Diabetic bakery products have unique long-term growth potential, fueled by the worldwide surge in diabetes cases. According to US National Institute of Health estimates, 20 million Americans (7% of the population) are currently diabetic. The World Health Organization puts the global figure at 171 million, predicting this to double by 2030. Euromonitor International forecast the diabetic bakery category to grow from US$393 million global retail sales in 2005 to US$536 million in 2010.

One lesson learned from the low-carb diet craze was that consumers are very attached to their baked treats, but if taste and texture aren’t up to scratch, they will spurn those "healthy" offerings. The market potential of low-sugar bakery products is not only huge but growing exponentially, guaranteeing rich pickings for those manufacturers who can please consumer palates.

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